Over the past week, industrial projects and electricity rates have occupied a large place in the Quebec media landscape.
Posted at 11:00 a.m.
These matters of importance to society must, however, be analyzed on the basis of exact facts and in their entirety. Erroneous and incomplete information has unfortunately circulated in this regard and it is important to rectify this in order to make a fair and informed assessment.
First, a correction is needed with regard to the electricity rates paid by large industrial consumers of electricity in Québec. Contrary to what has been conveyed in certain media, Hydro-Québec’s industrial customers are subject to electricity rates that are not below, but well above the average cost incurred by Hydro-Québec for to serve. More specifically, according to Hydro-Québec’s own figures filed with the Régie de l’énergie du Québec1, the electricity bill of manufacturers subject to Rate L (large power) corresponds to 113% of this average cost for Hydro-Québec. As for Hydro-Québec’s residential customers, they only pay 86% of the costs required to serve them. In other words, industrial and commercial customers in Quebec finance the rates of Hydro-Quebec’s residential customers, and not the other way around.
Quebec aluminum smelters have also been in the spotlight over the past few days. Here again, it is important to correct certain interpretations. Quebec aluminum smelters pay for their electricity according to special contracts established in partnership with the Quebec government and these costs are excluded from Hydro-Quebec’s needs when it comes time to establish rates. The electricity costs required to supply Québec’s aluminum smelters are therefore not borne by other Hydro-Québec customers.
Prioritize our industries before exporting
It is true that Quebec society faces many challenges when it comes to the judicious allocation of its own electricity.
A question arises: why is Hydro-Québec’s desire to increase its exports to the United States absent from the current debate even though the state-owned company indicates its unavailability to meet the expectations of Quebec industrial projects? with high energy needs?
In addition, the profitability calculations made by Hydro-Québec seem to fluctuate depending on the projects to be evaluated. On the one hand, the state-owned company uses the average cost per kilowatt-hour to measure the profitability of exports under recent contracts with the states of Massachusetts and New York. On the other hand, it uses the marginal cost per kilowatt hour (which is higher than the average cost) when the time comes to assess the profitability of industrial projects here, which amounts to penalizing them head on.
We are therefore entitled to question ourselves as to whether Hydro-Québec does not favor exports to the detriment of the needs of Quebec industrialists. However, a report published by the Institut du Québec (IDQ) in June 2022 concludes that promoting the use of energy by companies located on Quebec soil is more economically and socially profitable for Quebec than exporting it.
By way of illustration, the IDQ has calculated that the impact on Quebec’s GDP (excluding electricity production) is 8.96¢/kWh for electricity sales to aluminum smelters in Quebec, while the The impact on this GDP is only 0.34¢/kWh for exports of this electricity.
Hydro-Québec therefore seems to be applying the practice of double standards by favoring the growth of exports, which is no doubt beneficial for the government corporation and its financial results, while hindering access to electricity for businesses in the industrial sector here, yet more promising for economic, social and environmental development and for Quebecers in the long term.
A governance framework for the benefit of Québec society
The stakes are many and we are certainly faced with a rapidly changing energy context, on a global scale. Nevertheless, the priorities for Québec society and the choices in terms of economic and industrial development must remain the prerogative of the Québec government. It is up to the latter, and not to a government corporation, to make decisions that are promising for the future of Québec, taking into account all sectors of society.
1. Information provided to the Régie de l’énergie by Hydro-Québec under section 75.1 for the year 2021.